Part 2

Developing the Marketing

Channel

   
 Chapter 5

Strategy in Marketing Channels

   
Objective 1: 5
Marketing Channel Strategy 

Channel Strategy:

The broad principles by which the

firm expects to achieve its
distribution objectives for its
target market(s)

   
Objective 2:
5
Distribution Decisions

1. The role of distribution in the firm’s overall

objectives & strategies
2. The role distribution should play in the
marketing mix
3. The design of the firm’s marketing channels
4. The selection of channel members
5. The management of the marketing channel in
order to implement the firm’s channel design
effectively & efficiently on a continuing basis
6. The evaluation of channel member
performance
   
Objective 3:
5
Channel Strategy as Overall 
Corporate Objective

The higher the priority given to

distribution, the higher the level
at which it should be considered
in formulating the organization’s
overall objectives and strategies

   
 The Value Chain 5

Firm infrastructure

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Human resource

ar
Support

gi
Activities management

n
Technology development

Human resource
management
Operations Outbound Marketing i
Service
g
s logistics& sales ar
M
n
   
Primary
 Determining the Priority Given  5
to Distribution

Distribution does increasingly warrant

the attention of top management,
because competition has made the
issue of distribution too important for
top management to ignore.

• Rayovac Corp.
• WD-40
• Coca-Cola
• Procter & Gamble Company
   
Objective 4: 5

Channel Strategy & the Marketing Mix

The essence of modern marketing

management:

To develop a marketing
mix of product, price,
promotion, & distribution
(place)
   
Objective 5: 5

Emphasis on Distribution Strategy

IF • Distribution is the most relevant variable for

: satisfying target market demands.
or • Parity exists among competitors in the other
three variables of the marketing mix.
or • A high degree of vulnerability exists because
of competitors’ neglect of distribution.
or • Distribution can enhance the firm by creating
synergy from marketing channels.

THEN: The firm should choose distribution

  strategy for strategic
  emphasis
 5
Target Market Demand

Firms should stress distribution when

it serves customers’ needs in the
target market.

Marketing channels are so closely linked

to customer need satisfaction because it is
through distribution that firms can provide
the kinds and levels of service that make
for satisfied customers.

   
 5
Competitive Parity

Distribution advantages are not easily

copied by competitors.

Distribution advantages are based on a

combination of superior strategy,
organization, and human capabilities.

   
 5
Distribution Neglect

Competitors’ neglect of distribution

strategies provides excellent
opportunities.

The channel manager must analyze target

markets to determine whether
competitors have neglected distribution
and whether vulnerabilities exist that can
be exploited.
   
 5
Distribution and Synergy 

“Hooking up” with a mix of

cooperative channel members will
strengthen the channel.

Because each channel member is an

independent entity, rewarding
opportunities exist for channel managers
to cultivate cooperation among members.

   
Objective 6: 5
Differential Advantage 
& Channel Design

Differential advantage, also called sustainable

competitive advantage, occurs when a firm
attains a long-term, advantageous position
in the market relative to competitors.

• Caterpillar

   
 5
Positioning the Channel

A firm that plans the channel and makes

decisions by viewing the relationship
with channel members as a partnership
or strategic alliance that offers
recognizable benefits to the
manufacturer & channel members on a
long-term basis

• Infiniti
   
Objective 7: 5
Selection of Channel Members

Because customers perceive channel

members as an extension of the
manufacturer’s own organization, members
should:

• Reflect channel strategies the firm has

developed to achieve its distribution objectives
• Be consistent with the firm’s broader marketing
objectives & strategies
• Reflect the objectives & strategies of the
organization as a whole
   
 Objective 8: 5
Channel Strategy & Managing the 
Channel

How close a relationship How should the

should be developed marketing mix be used to
with the channel enhance channel
members? member cooperation?
3
Strategic
Questions

How should the channel

members be motivated to cooperate
in achieving the manufacturer’s
  distribution objectives?
 
 5
Closeness of Channel Relationships

Factors to consider

• Distribution intensity
• Targeted markets
• Products
• Company policies
• Middlemen
• Environment
• Behavioral dimensions
   
 Marketing Mix in 5

Channel Management

Product
strategy

Distribution Pricing
Marketing
strategy strategy
Mix

Promotion
strategy

   
Objective 9: 5
Motivation of Channel Members

Portfolio concept:

A tool for motivating different types

and sizes of channel members participating
in various channel structures who may respond
differently to various motivation strategies.
   
Objective 10: 5
Evaluation of Channel Member
Performance

Channel manager’s involvement

in evaluating member performance is integral to
developing & managing channel

Have provisions been made in the design and

management of the channel to assure that
channel member performance will be
evaluated effectively?